The Guns of Bitcoin (2017)(medium.com)
medium.com
The Guns of Bitcoin (2017)
https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f779309a718
113 comments
It's not "plain wrong." When minting a new currency you need a way to bootstrap it into being an accepted medium of exchange, and taxes help serve that purpose. They aren't the only method (and I'm not sure historically whether that was the case for the USD), but it isn't baseless.
Currencies existed well before governments minted them. Plus the dollar was once backed by gold: you can transition from a convertible system to a fiat system, which has nothing to do with fiscal policy.
This reads like an argument, but it doesn't seem to contradict anything I said. Am I misinterpreting you?
> Currencies existed well before governments minted them.
Sure. Nevertheless, to accept a currency as a medium of exchange when it has no value to you personally (bank notes, gold, etc) you need to have confidence that you can exchange it to somebody else for something you do care about, regardless of who mints it.
> Plus the dollar was once backed by gold: you can transition from a convertible system to a fiat system, which has nothing to do with fiscal policy.
Yep. As stated, "[taxes] aren't the only method" to bootstrap a currency, and in practice transitioning from a gold backing to fiat seems to work smoothly (somehow...it's not hard to imagine an alternate reality where the public heard their dollars wouldn't be exchangeable for gold, the public lost faith in the dollar, and the dollar tanked as a result).
> Currencies existed well before governments minted them.
Sure. Nevertheless, to accept a currency as a medium of exchange when it has no value to you personally (bank notes, gold, etc) you need to have confidence that you can exchange it to somebody else for something you do care about, regardless of who mints it.
> Plus the dollar was once backed by gold: you can transition from a convertible system to a fiat system, which has nothing to do with fiscal policy.
Yep. As stated, "[taxes] aren't the only method" to bootstrap a currency, and in practice transitioning from a gold backing to fiat seems to work smoothly (somehow...it's not hard to imagine an alternate reality where the public heard their dollars wouldn't be exchangeable for gold, the public lost faith in the dollar, and the dollar tanked as a result).
As far as I know, there is no currency that existed because there were taxes involved, and that's certainly not the experience of the major fiat currencies.
In fact it might be otherwise: taxes are a deterrent to use currency, which is why barter is so often used by people and small businesses to avoid the tax-man today.
In fact it might be otherwise: taxes are a deterrent to use currency, which is why barter is so often used by people and small businesses to avoid the tax-man today.
Wow, app wall, that’s a new one. “Download the app or create an account to read.”
Seen it. Most recently was trying to view a reddit on mobile. Said download the app or take a hike.
Circumvented by doing 'request web view' option (in mobile safari)
You can use something like https://getpocket.com/
> What makes dollars valuable is that the government wants them back.
Very common misconception. Dollars have value because there is demand for them (governments, other governments, other people and institutions). Bitcoin also has value because there is demand for it. As does your house, expensive art, etc.
Why does anything have value? Because someone else will pay your for it. I can say my pencil is worth $1 billion, but it doesn't really unless someone else will execute the trade.
Very common misconception. Dollars have value because there is demand for them (governments, other governments, other people and institutions). Bitcoin also has value because there is demand for it. As does your house, expensive art, etc.
Why does anything have value? Because someone else will pay your for it. I can say my pencil is worth $1 billion, but it doesn't really unless someone else will execute the trade.
You mentioned expensive art, which is a pretty fascinating field because the value of individual pieces can be fairly subjective and difficult to appraise.
This has massive tax implications in the United States. Imagine donating a piece of art, which you claim is worth $1 million. But the question of who is allowed to make that claim is quite complex, and often goes unnoticed unless the IRS chooses to investigate.
A couple of articles on this:
Inflated art appraisals cost U.S. government untold millions https://www.latimes.com/local/la-me-irs2mar02-story.html
The secretive panel of art experts that tells the IRS how much art is worth https://www.washingtonpost.com/lifestyle/magazine/the-secret...
This has massive tax implications in the United States. Imagine donating a piece of art, which you claim is worth $1 million. But the question of who is allowed to make that claim is quite complex, and often goes unnoticed unless the IRS chooses to investigate.
A couple of articles on this:
Inflated art appraisals cost U.S. government untold millions https://www.latimes.com/local/la-me-irs2mar02-story.html
The secretive panel of art experts that tells the IRS how much art is worth https://www.washingtonpost.com/lifestyle/magazine/the-secret...
Specifically, "reserve demand." People and institutions demand to hold a positive balance of the monetary good, and the aggregate sum of these reserve demands set the purchasing power.
The notion that fiat money has value because governments demand it in taxes, might set a non-zero value for the money, but it does not set a specific price level.
For instance, I could make a trade for dollars at the exact moment that I pay taxes, and it wouldn't matter what the actual value of the dollars is at that point. I would hold the dollars long enough to pay the taxes but no longer, so my reserve demand for the dollars is minimal. The effect on my finances is exactly the same if one dollar buys a pair of leather boots or a single shoelace.
So: positive value, but no specific purchasing power.
The notion that fiat money has value because governments demand it in taxes, might set a non-zero value for the money, but it does not set a specific price level.
For instance, I could make a trade for dollars at the exact moment that I pay taxes, and it wouldn't matter what the actual value of the dollars is at that point. I would hold the dollars long enough to pay the taxes but no longer, so my reserve demand for the dollars is minimal. The effect on my finances is exactly the same if one dollar buys a pair of leather boots or a single shoelace.
So: positive value, but no specific purchasing power.
There is a reserve demand created because taxes are not due until some time after the transaction that created the tax liability. If you don't want to have exchange rate risk, you need to hold the dollars until the tax is due.
It's a good point, but:
If you don't want to hold the fiat, you can always send taxes on a continual basis to the collection agency (most people do this with each paycheck, via the automatic withholding).
In the case of a rapidly inflating fiat currency, you would make the trade, since you are probably going to lose value holding the dying fiat.
If you don't want to hold the fiat, you can always send taxes on a continual basis to the collection agency (most people do this with each paycheck, via the automatic withholding).
In the case of a rapidly inflating fiat currency, you would make the trade, since you are probably going to lose value holding the dying fiat.
Yes.
Usually that concept in that quote is a baseline of demand. The government will accept tax payments in US dollars, but they will probably demand no BitCoin, stamps, bullion, etc.
That said, tax payments are not the only type of demand.
Usually that concept in that quote is a baseline of demand. The government will accept tax payments in US dollars, but they will probably demand no BitCoin, stamps, bullion, etc.
That said, tax payments are not the only type of demand.
> Why does anything have value? Because someone else will pay your for it.
Sure, but there is a reason why dollars will have value in future: the quantity of outstanding dollar-denominated debt and future tax liabilities vastly exceeds the number of dollars in circulation. As people will need to have dollars for future repayments in future, you won't have trouble finding people to execute a trade of dollars you have for things you want. The [central] banking system can also vary the amount of dollars in circulation to link the supply of a currency on a given day to its demand and keep prices in line.
Conversely there's little reason to believe that anybody will need most of the Bitcoin in circulation in future [very little BTC denominated debt, and all other payments or speculative holding can be made with other currencies, crypto or otherwise], and no other stabilising mechanism. So whilst you can say your BTC is worth at least what you paid for it, it really isn't unless you're lucky enough to find someone else to offload it to.
Sure, but there is a reason why dollars will have value in future: the quantity of outstanding dollar-denominated debt and future tax liabilities vastly exceeds the number of dollars in circulation. As people will need to have dollars for future repayments in future, you won't have trouble finding people to execute a trade of dollars you have for things you want. The [central] banking system can also vary the amount of dollars in circulation to link the supply of a currency on a given day to its demand and keep prices in line.
Conversely there's little reason to believe that anybody will need most of the Bitcoin in circulation in future [very little BTC denominated debt, and all other payments or speculative holding can be made with other currencies, crypto or otherwise], and no other stabilising mechanism. So whilst you can say your BTC is worth at least what you paid for it, it really isn't unless you're lucky enough to find someone else to offload it to.
I'm not sure how you disproved what you quoted. You only strengthened it. Governments create artificial demand for the national currency.
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My model of fiat money is like a battery: the government is both the outgoing pole (money printing) and the incoming pole (taxation). Money flows through the economy from one pole to the other, but all demand terminally stems from the taxation pole just as all supply stems from the printing pole.
Of course, things get more complicated because money exists across time, credit, and inflation. But as a simple model it explains why, for example, money tends to get devalued when it stops being accepted as tax. Just as a circuit stops flowing when you disconnect either pole.
Of course, things get more complicated because money exists across time, credit, and inflation. But as a simple model it explains why, for example, money tends to get devalued when it stops being accepted as tax. Just as a circuit stops flowing when you disconnect either pole.
I disagree strongly here - there really is no incoming pole in the government and the outgoing pole is incredibly ineffective. The US (as an example) doesn't have the ability to effectively decrease monetary supply by simply failing to redistribute taxes - the total national wealth of the US is currently 105 trillion[1] while the total tax revenue is somewhere in the 3.5 trillion[2] range - it would take 30 years to cycle the full value of the US through the government at the current churn rate, the GDP is significantly smaller and (at 22 trillion) would likely take six years to fully process.
Money can be thought of like a battery - sorta, but more like a bank of batteries - each one of us has a certain earning and spending potential that constitutes the voltage we're contributing to the economy - and it's all of us tiny batteries that contribute a much large proportion to the over all monetary flow than the big contributors like government (who are, by comparison, in the minority).
1. https://en.wikipedia.org/wiki/List_of_countries_by_total_wea...
2. https://en.wikipedia.org/wiki/United_States_federal_budget
Money can be thought of like a battery - sorta, but more like a bank of batteries - each one of us has a certain earning and spending potential that constitutes the voltage we're contributing to the economy - and it's all of us tiny batteries that contribute a much large proportion to the over all monetary flow than the big contributors like government (who are, by comparison, in the minority).
1. https://en.wikipedia.org/wiki/List_of_countries_by_total_wea...
2. https://en.wikipedia.org/wiki/United_States_federal_budget
> The US (as an example) doesn't have the ability to effectively decrease monetary supply by simply failing to redistribute taxes
Why would it matter how quickly the government could cycle through the national wealth, which includes all private assets? The M1 money supply, at 5.2T[1] and using your 3.5T tax revenue figure, would take less than two years to cycle through.
1. https://fred.stlouisfed.org/series/M1
Why would it matter how quickly the government could cycle through the national wealth, which includes all private assets? The M1 money supply, at 5.2T[1] and using your 3.5T tax revenue figure, would take less than two years to cycle through.
1. https://fred.stlouisfed.org/series/M1
Very little value is in M1 and most of M1 is not cycled through the economy, the vast majority of M1 out there is used for illicit trading so I wanted to avoid touching on it too heavily in the paragraph above but there is a lot of M1 out there that won't get back to the government in a decade.
Actually you wrong. Dolar has value, because even if no one will want dollar, government will buy it for dollar. It backed on government promise.
Not sure if this is a joke? What does it mean to say the government will buy a dollar for a dollar?
That guarantee is sort of like the spark plug of the economy - because it exists (and because the US government was a thing) people initially believe in the value of a dollar (and the same thing happened with every currency) but the currency continues to have value (and has a value exceeding that initial US valuation) because other people will buy it as well.
Also, just for a moment, the statement: "Dollar has value, because even if no one will want dollar, government will buy it for dollar." - that's a fair bit of nonsense, outside of the dollar having an exchange value the dollar has no value - fiat currency (and even precious metals TBH) only have value to to the continued demand for them and if that demand falters or if people stop valuing a dollar at as many whoppers as it used to be valued - then bad things start to happen really fast and the government is pretty powerless to stop it once it starts.
Also, just for a moment, the statement: "Dollar has value, because even if no one will want dollar, government will buy it for dollar." - that's a fair bit of nonsense, outside of the dollar having an exchange value the dollar has no value - fiat currency (and even precious metals TBH) only have value to to the continued demand for them and if that demand falters or if people stop valuing a dollar at as many whoppers as it used to be valued - then bad things start to happen really fast and the government is pretty powerless to stop it once it starts.
https://outline.com/VBSEgq
Read without annoying app/account wall
Read without annoying app/account wall
tired old arguments
Well it is possible to pay some (municipal-level) taxes in Switzerland in Bitcoin. That’s a start. As for the guns — how about, say, using Bitcoin in lieu of dollars for petroleum and other import-export settlements? You can’t sanction Bitcoin, you know.
I would like to see a total ban/block of any kind of cryptocurrency articles on HN. I'm happy to include my own, if that's what it takes.
https://louwrentius.com/cryptocurrencies-are-detrimental-to-...
https://louwrentius.com/cryptocurrencies-are-detrimental-to-...
I'd like to answer your challenge that you put forward in your article. I can think of two straightforward uses for cryptos.
1. It helps evade financial censorship imposed on legal businesses and individuals. Ex: 4chan is financially censored, and can only take bitcoin and other Cryptos as payment despite having broken no law.
2. Financial Privacy (in say, monero). Ex: Support controversial causes without having to worry about losing your job in case of a leak.
1. It helps evade financial censorship imposed on legal businesses and individuals. Ex: 4chan is financially censored, and can only take bitcoin and other Cryptos as payment despite having broken no law.
2. Financial Privacy (in say, monero). Ex: Support controversial causes without having to worry about losing your job in case of a leak.
you ask for a benefit. a benefit of Bitcoin is zero unexpected inflation. Zero unexpected inflation means the cantillon effect is reduced with adoption of Bitcoin as money, driving out the systems behind central bank caused wealth inequality
Seems like bitcoin experienced a whole lot of unexpected inflation in early March this year. And fall of last year. And November 2018. And January 2018. And... well, you get the picture.
Bitcoin guarantees the supply remains fixed. But inflation is also a function of demand, and that is well outside its control.
Bitcoin guarantees the supply remains fixed. But inflation is also a function of demand, and that is well outside its control.
Indeed it's the exact opposite: as the supply of the dollar is a function of its demand [at an interest rate which can be varied if an inflation target is expected to be missed] its inflation is almost entirely predictable. cf BTC, which predicts zero inflation but has experienced more diminution in purchasing power since late 2018 than the dollar has seen in decades.
The supply of dollars is a function of the monetary policy. Are you suggesting you can predict what M2 will be in 5 years, or even 6 months? Please share your expectation.
I can confidently predict that M2 will be whatever it needs to be to keep PCE inflation around the 2% mark.
wake up. real inflation in the US has been closer to 8%. Look at real estate, equities, gold. you can't see it coming, all fiat ends with hyperinflation
What inflation in early march are you referring to? From my view the fixed supply growth and production from new blocks went right on schedule. Nothing unexpected
The price in bitcoin of a basket of actual consumable goods went up significantly (ie, BTC's dollar value tanked). How is that not inflation?
Or are you claiming that was not "unpredictable"?
Or are you claiming that was not "unpredictable"?
You are pointing to price volatility. The comment is talking about inflation. Price discovery occurs in all markets with varying degrees of volatility. Speculative bubbles, crashes, etc result occur when new information causes price discovery. Its an ongoing process in an ever-changing world. Inflation is specifically price increases from change in the amount of money in a system. The delta in money supply for Bitcoin is entirely predictable and that was the claim
> Inflation is specifically price increases from change in the amount of money in a system.
No it isn't. Inflation is a general rise in prices in an economy, period, of which change in the amount of money in circulation is only one possible cause [it can also circulate faster or slower due to change in demand, supply constraints, import prices etc].
No it isn't. Inflation is a general rise in prices in an economy, period, of which change in the amount of money in circulation is only one possible cause [it can also circulate faster or slower due to change in demand, supply constraints, import prices etc].
You have confused monetary inflation and price inflation. I'm talking about monetary inflation as per https://en.wikipedia.org/wiki/Monetary_inflation
No, people that fixate on low rates of money supply growth whilst their asset halves in value over a very short time period are the ones confusing monetary and price inflation. Price inflation matters; it's what your money pays for in future [and what economists refer to when they say 'inflation]. 'Monetary inflation' matters only inasmuch as it influences price inflation, which turns out to be surprisingly little.
The original thread was about benefits. Fixing the money supply growth rate isn't a benefit if your asset's purchasing power drops over 60% in two and a half years. And money supply growing quite considerably turns out not to be a drawback when prices grow predictably and slowly and the system allows for the money supply to contract again if prices overheat.
The original thread was about benefits. Fixing the money supply growth rate isn't a benefit if your asset's purchasing power drops over 60% in two and a half years. And money supply growing quite considerably turns out not to be a drawback when prices grow predictably and slowly and the system allows for the money supply to contract again if prices overheat.
"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation." - Ludwig von Mises
Your 60% drop claim is rather vapid considering I could pull any other arbitrary time horizon and give you a massive increase in purchasing power.
Your 60% drop claim is rather vapid considering I could pull any other arbitrary time horizon and give you a massive increase in purchasing power.
It's a cute quote, but there's a reason modern economists don't conflate labour inputs and value or monetary expansion and price inflation. It's actually much more useful not to use the same words for phenomena when you're studying the degree to which they're related. And more useful to play semantic games when the data unambiguously refutes the argument that fixing one value necessarily holds the other constant, of course...
(Getting the term 'inflation' associated primarily with price rises was the one battle Quantity Theorists won.)
You are welcome to prefer to use 'inflation' as it was used 100 years ago instead of as it is used now, but 'awful' and 'silly' were compliments once....
> Your 60% drop claim is rather vapid considering I could pull any other arbitrary time horizon and give you a massive increase in purchasing power.
No, what is vapid is the pretence that an asset has the advantage of 'zero unexpected inflation' when it's lost purchasing power at a rate which would be termed hyperinflation were it a national currency. It's a bit like defending the validity of immortality elixirs by arguing that over other time frames, the patient survived.
You are welcome to prefer to use 'inflation' as it was used 100 years ago instead of as it is used now, but 'awful' and 'silly' were compliments once....
> Your 60% drop claim is rather vapid considering I could pull any other arbitrary time horizon and give you a massive increase in purchasing power.
No, what is vapid is the pretence that an asset has the advantage of 'zero unexpected inflation' when it's lost purchasing power at a rate which would be termed hyperinflation were it a national currency. It's a bit like defending the validity of immortality elixirs by arguing that over other time frames, the patient survived.
Calling early price discovery leg down for Bitcoin hyperinflation is dishonest at best. Even ironic as hyperinflation occurs when there is a continuing rapid increase in money supply.
If that was hyperinflation, what would you call Bitcoin's 150% leg up between December 2018 and today?
If that was hyperinflation, what would you call Bitcoin's 150% leg up between December 2018 and today?
"In theoretical investigation there is only one meaning that can rationally be attached to the expression Inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur." - Also your guy
Even Mises acknowledges there are two parts to the system and that it's, in the end, about relative pace. If that is so, the phenomenon must still be able to occur regardless of how frozen your supply, just off the second variable.
"Our fringe school likes to use two common terms opposite from how everyone else does, hence you are wrong" isn't an actual argument, by the way.
Even Mises acknowledges there are two parts to the system and that it's, in the end, about relative pace. If that is so, the phenomenon must still be able to occur regardless of how frozen your supply, just off the second variable.
"Our fringe school likes to use two common terms opposite from how everyone else does, hence you are wrong" isn't an actual argument, by the way.
This isn't opposite, its closer to a root cause than an opposite term. Anyway, supply and demand govern all prices, I wasn't arguing against such basic economic tenants. I'm just pointing to what inflation is and that is an expansion of money supply.
you want to censor discussion around a promising technology. why?
I guess you can make a case for the neo-luddites
Bitcoin is not really liked on HN. I'm guessing most of the older HN guys don't seem really interested in the tech or is terrified by the price action, perhaps
I'm on HN. I like Bitcoin. Surely, I am not alone
You are not. I will say, the general consensus seems to be negative, but I wouldn't say it's disliked by all.
The idea of something being outside the control of the Nanny state terrifies them. One of his primary arguments is that cryptocurrencies "facilitate crime".
[deleted]
What are the guns of bitcoin? In answer I point to is its network. People who are willing to take payment in bitcoin are different from the general population. It's a club many desire to join.
People using pine wood for flooring to spite the king for claiming it is probably the most American thing I have ever heard of.
Pine floors are terrible to maintain though.
'cut off your nose to spite the king'
'cut off your nose to spite the king'
People have done worse for less, a specific parallel to current events should come to mind.
In any case i'll remove pine floors from my diy tiny house project checklist.
In any case i'll remove pine floors from my diy tiny house project checklist.
imo, as a builder of one, tiny house has such a low squarefootage that you can spring for high quality materials without breaking the bank.
it's easy enough to find 200sqft (that's a 20' cargo container's worth) of high quality unmatched leftover flooring from a sale.
it's easy enough to find 200sqft (that's a 20' cargo container's worth) of high quality unmatched leftover flooring from a sale.
>Pine floors are terrible to maintain though.
Why? Is it the sap?
Why? Is it the sap?
Pine is a very soft wood. Some you can dent with a pencil.
Our dining table was like that when I was a kid. You could see all sorts of writing in it from too much pencil pressure when doing homework.
Our dining table was like that when I was a kid. You could see all sorts of writing in it from too much pencil pressure when doing homework.
They are soft and get dents and such pretty easily.
The common mistake is to try to compare Bitcoin to a predefined experience of money.
Bitcoin's value is multifaceted. From a very simplistic perspective, it can be compared to gold. Things get more interesting when you value aspects such as it being:
- Fully digital
- Verifiable by the common individual
- Sent and received with no interference from third parties
- Free from supply emission increases or control
Each of these is especially hard to come across in any other form of money. Combining them is unprecedented.
Bitcoin's value is multifaceted. From a very simplistic perspective, it can be compared to gold. Things get more interesting when you value aspects such as it being:
- Fully digital
- Verifiable by the common individual
- Sent and received with no interference from third parties
- Free from supply emission increases or control
Each of these is especially hard to come across in any other form of money. Combining them is unprecedented.
> From a very simplistic perspective, it can be compared to gold.
It is indeed very simplistic to compare it to gold and this is sadly part of the Bitcoin narrative. Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. We can imagine than if a Bitcoin2 is created with similar economic properties and gain more traction it will automatically replace the Bitcoin1 as a store of value. Obviously, this can happen to gold either but with much less probability thinking on all the financial network gold is part of.
It is indeed very simplistic to compare it to gold and this is sadly part of the Bitcoin narrative. Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. We can imagine than if a Bitcoin2 is created with similar economic properties and gain more traction it will automatically replace the Bitcoin1 as a store of value. Obviously, this can happen to gold either but with much less probability thinking on all the financial network gold is part of.
Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison.
Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes.
Also, gold's store of value power is also attributed from its stock to flow ratio (the difficulty of inflating gold supply). Bitcoin has an even better stock to flow ratio, which is why its often compared to gold.
Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes.
Also, gold's store of value power is also attributed from its stock to flow ratio (the difficulty of inflating gold supply). Bitcoin has an even better stock to flow ratio, which is why its often compared to gold.
> Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes.
Gold is more connected to the regulated financial world than Bitcoin. The network effect is not only about user base but interrelation with other systems. Not saying that Bitcoin could not have a bigger place but it is not there yet.
Gold is more connected to the regulated financial world than Bitcoin. The network effect is not only about user base but interrelation with other systems. Not saying that Bitcoin could not have a bigger place but it is not there yet.
I see, you're saying gold is basically more established in the current financial system.
It might just be semantics, but when you say gold has stronger network effects than bitcoin, I'm imagining that an additional user provides X value to the gold system, but an additional bitcoin user only adds X-1 value to bitcoin. Which I believe isn't true, both networks probably follow the same marginal utility curves.
It might just be semantics, but when you say gold has stronger network effects than bitcoin, I'm imagining that an additional user provides X value to the gold system, but an additional bitcoin user only adds X-1 value to bitcoin. Which I believe isn't true, both networks probably follow the same marginal utility curves.
Tether (USDT) has more volume than Bitcoin which could mean that the network effect ironically turns to stable coins connected to fiat money taking advantage of permissionless protocols and not caring about the native assets like Bitcoin or Ethereum.
Stable coins like Tether are mostly used by large exchanges for liquidity purposes.
Retail users rarely use USDT to buy/sell goods or exchange with one another. It is also not really permissionless because you need to register with the administrators of USDT and wire a bank transfer if you ever want to convert your USDT to USD. All fiat backed stablecoins have this inherent flaw of having an intermediary party to "parent" transactions. An example of this is Tether banlisting addresses of suspected stolen coins.
Retail users rarely use USDT to buy/sell goods or exchange with one another. It is also not really permissionless because you need to register with the administrators of USDT and wire a bank transfer if you ever want to convert your USDT to USD. All fiat backed stablecoins have this inherent flaw of having an intermediary party to "parent" transactions. An example of this is Tether banlisting addresses of suspected stolen coins.
Just gonna quickly fork this gold and call it silver
What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2". Some even with overwhelming support from powerful actors. If they fail like they have during Bitcoin's infancy, later on they have no chance.
> What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2".
I am saying we don't have yet that Bitcoin2 yet and the sum of people and organizations using cryptocurrencies is pretty low comparing to their potential of a Bitcoin2 occurring with more user base.
I am saying we don't have yet that Bitcoin2 yet and the sum of people and organizations using cryptocurrencies is pretty low comparing to their potential of a Bitcoin2 occurring with more user base.
Gold is a very good comparison (especially since it is inherently pretty worthless much like bitcoins) but I think the core currency quality it has is the limit of supply. One of the more amusing qualities of the fallout world to me was always the usage of bottle caps as a currency. Oh sure we have a pretty much infinite supply now but in a post-war setting it's a relatively common material (we don't use rhodium for currency because it's rare in absolute terms and also very hard to come by) that isn't going to increase in volume - that said more recent games have under cut that with the sheer commonality of nuka cola, and it also seems like a rather easy currency to forge per the volume it takes to transact an exchange.
The other points you mentioned are what's really interesting to me, the verifiable property is one that physical currency has struggled with for a long term and the ledger aspect has no equivalence in physical currency exchange[1] - it's really neat!
1. Except, of course, for my most favorite currency ever the Rai stones https://en.wikipedia.org/wiki/Rai_stones which are essentially a built-in fiat currency that no one ever actually counts or carries but instead the ownership was/is tracked entirely by oral history which is amazing.
The other points you mentioned are what's really interesting to me, the verifiable property is one that physical currency has struggled with for a long term and the ledger aspect has no equivalence in physical currency exchange[1] - it's really neat!
1. Except, of course, for my most favorite currency ever the Rai stones https://en.wikipedia.org/wiki/Rai_stones which are essentially a built-in fiat currency that no one ever actually counts or carries but instead the ownership was/is tracked entirely by oral history which is amazing.
The fixed supply is the most interesting aspect. There could be an extremely huge gold deposit, or someone could figure out how to extract it from the ocean efficiently, or an asteroid / planet made of gold discovered and mined. But there will never be more bitcoin. More bitcoin would just fork the chain, and it wouldn't be bitcoin anymore.
Forks are so easy in practice though that it seems magic/wishful thinking to assume there's anything particularly special about one branch's artificial scarcity. It seems axiomatic that in using a tree-based structure branches should be the natural and expected state and pretending the other branches don't exist is a fascinating strategy that I just have a rough time thinking holds over the long term, especially when trying to maintain something like artificial scarcity.
Fork of bitcoin is not bitcoin. Only 21 million bitcoin will ever exist and that’s a self-fulfilling prophecy. Whether that 21 million bitcoin branch will remain the dominant in terms of use and hashpower is under question, but there will only ever be 21 million bitcoin.
My exact point is that this is a fun "semantic" game. From a technical standpoint, the entire merkle tree is bitcoin, because that is the root data structure, however you want to "brand" individual forks/branches they are always going to be inter-related. The fact that forks already exist today seems to clearly undermine the idea that there are "only ever 21 million bitcoin" because even just taking "Bitcoin Gold" and "Bitcoin Cash" into account alone represent an "additional" 42 million possible bitcoin. (That's before you take in the dozens of other bitcoin forks, and the larger picture of how generally non-scarce cryptocoins are in the general forest beyond the bitcoin tree.)
It doesn't really matter which fork is "dominant", the artificial scarcity seems extremely artificial in a most brittle way and not that scarce from a respectable technical viewpoint.
You can certainly try to build a definition of "dominant" based on mining "hashpower", but that's a social/economic/political/geopolitical minefield much more than it is a technical factor inherent to bitcoin's underlying data structure, because the underlying data structure is forks ("dominance" is a lucky/expedient edge case).
It doesn't really matter which fork is "dominant", the artificial scarcity seems extremely artificial in a most brittle way and not that scarce from a respectable technical viewpoint.
You can certainly try to build a definition of "dominant" based on mining "hashpower", but that's a social/economic/political/geopolitical minefield much more than it is a technical factor inherent to bitcoin's underlying data structure, because the underlying data structure is forks ("dominance" is a lucky/expedient edge case).
You are confused. If you try spending bitcoin cash on bitcoin network you will fail, because bitcoin cash utxos are not bitcoin utxos and bitcoin cash is not bitcoin. There are no additional 42 mil bitcoin, there are additional 42 mil of some other tokens spendable on some other networks.
I don't think I am confused. I told you I have a different viewpoint on this. You are claiming different branches of the same tree are magically distinct from each other because they have different names and magic runes sketched into them with a pencil, and all I see is a single tree in a huge forest full of trees. I don't think I'm going to convince you of my viewpoint, but my viewpoint is not confused.
You aren't likely to convince me that one branch is more scarce than the others because I can see how big the whole tree is, and especially because I can see how many other trees are in the forest already.
(ETA: To make it clearer, you especially aren't going to convince me because I think Proof of Work is a waste of processing power. The real scarcity is processing power, and again, that's a political/economic game, that only props up artificial scarcity so far. Certainly not far enough that I trust the bitcoin tree to remain scarce in the long run. Not a question of if, but a question of when.)
You aren't likely to convince me that one branch is more scarce than the others because I can see how big the whole tree is, and especially because I can see how many other trees are in the forest already.
(ETA: To make it clearer, you especially aren't going to convince me because I think Proof of Work is a waste of processing power. The real scarcity is processing power, and again, that's a political/economic game, that only props up artificial scarcity so far. Certainly not far enough that I trust the bitcoin tree to remain scarce in the long run. Not a question of if, but a question of when.)
Your viewpoint on forks doesn't really check out. It's based on a misunderstanding of how related these forks are to Bitcoin.
Anything that forks off of bitcoin is an entirely separate network, asset and market. You can in fact fork Bitcoin today and attempt to create a market, will your new coin be valued as a Bitcoin and derive its current ~9000 USD price? So the value of a fork coin is not in its approximation to Bitcoin. It's merely tied to how much fire power you have to convince others to buy it.
Regardless of how you personally view the best use of cpu cycles, the market overwhelmingly disagrees. The network total hashrate has done nothing but go up and to the right since inception. Which is to say, that the market also disagrees with your theory that Bitcoin will lose scarcity (therefore value) over time.
Based on which signs or hypothetical scenario are you imagining that this whole systems turns back on itself and breaks?
Anything that forks off of bitcoin is an entirely separate network, asset and market. You can in fact fork Bitcoin today and attempt to create a market, will your new coin be valued as a Bitcoin and derive its current ~9000 USD price? So the value of a fork coin is not in its approximation to Bitcoin. It's merely tied to how much fire power you have to convince others to buy it.
Regardless of how you personally view the best use of cpu cycles, the market overwhelmingly disagrees. The network total hashrate has done nothing but go up and to the right since inception. Which is to say, that the market also disagrees with your theory that Bitcoin will lose scarcity (therefore value) over time.
Based on which signs or hypothetical scenario are you imagining that this whole systems turns back on itself and breaks?
In history, large numbers of people have committed grievous mistakes under the notion of "It's popular so it must be the right thing." Axis powers during WWII, e.g.
"You can in fact fork Bitcoin today and attempt to create a market, will your new coin be valued as a Bitcoin and derive its current ~9000 USD price?"
Yes. They're called shit coins. I'll make 21,000,000 shit coins in my currency and sell you one for $9,000. You can, make your own shit coins and just sell one of your shit coins back to me for $9,000. Money need not exchange hands.
How about this? I will sell you an arbitrary magic number for $9000. It's value is only good inside those that trade these magic numbers. The only difference between my offer and bitcoin is that many people are trading these magic numbers.
"You can in fact fork Bitcoin today and attempt to create a market, will your new coin be valued as a Bitcoin and derive its current ~9000 USD price?"
Yes. They're called shit coins. I'll make 21,000,000 shit coins in my currency and sell you one for $9,000. You can, make your own shit coins and just sell one of your shit coins back to me for $9,000. Money need not exchange hands.
How about this? I will sell you an arbitrary magic number for $9000. It's value is only good inside those that trade these magic numbers. The only difference between my offer and bitcoin is that many people are trading these magic numbers.
> The only difference between my offer and bitcoin is that many people are trading these magic numbers.
And that is a world of difference. If I sold a Bitcoin for half the market price, anyone rational would take that offer without thinking. Your shitcoin on the other hand has no persistent or reliable market value and you would not be able to find a buyer.
And that is a world of difference. If I sold a Bitcoin for half the market price, anyone rational would take that offer without thinking. Your shitcoin on the other hand has no persistent or reliable market value and you would not be able to find a buyer.
Again, your argument is that it's popular, so it must be good. Illicit drugs are also popular -- but how many people have died from overdose?
> Based on which signs or hypothetical scenario are you imagining that this whole systems turns back on itself and breaks?
This is an easy one to answer. Proof of work as implemented in bitcoin is the largest, weirdest incentivized, most highly distributed preimage attack [1] ever run against any hash algorithm that we know of in human history. The history of hash algorithms suggests that humanity has yet to invent a perfect hash algorithm (whether or not you agree that perfect hash algorithms are even mathematically theoretically possible), which makes it very clearly a matter of "when" the distributed preimage attack succeeds in breaking the hash algorithm altogether rather than "if".
> the market overwhelmingly disagrees
The "market" isn't by definition a rational actor and may just be a mob swept up into fervor. Ponzi schemes in general prey on weaknesses in a market's mentality or emotionality to follow bad long term advice for short term gains. (That example should work whether or not you also agree that bitcoin-style mining difficulty is also directly a unique modern variant of a Ponzi scheme.)
[1] https://en.wikipedia.org/wiki/Preimage_attack
This is an easy one to answer. Proof of work as implemented in bitcoin is the largest, weirdest incentivized, most highly distributed preimage attack [1] ever run against any hash algorithm that we know of in human history. The history of hash algorithms suggests that humanity has yet to invent a perfect hash algorithm (whether or not you agree that perfect hash algorithms are even mathematically theoretically possible), which makes it very clearly a matter of "when" the distributed preimage attack succeeds in breaking the hash algorithm altogether rather than "if".
> the market overwhelmingly disagrees
The "market" isn't by definition a rational actor and may just be a mob swept up into fervor. Ponzi schemes in general prey on weaknesses in a market's mentality or emotionality to follow bad long term advice for short term gains. (That example should work whether or not you also agree that bitcoin-style mining difficulty is also directly a unique modern variant of a Ponzi scheme.)
[1] https://en.wikipedia.org/wiki/Preimage_attack
Don't you think we have other problems too if Sha-2 is broken? I'm going to assume that you aren't worried about the numerous other applications where this scenario would be catastrophic?
In any case, this scenario has very well been accounted for. The Bitcoin network can fork its consensus rules when such drastic requirements require it. Such as to a different hashing algorithm, and snapshotting of its previous state.
> Ponzi scheme This goes back to square one, which is that in the absence of understanding the value of bitcoin, a scheme is the only logical explanation.
We are now sitting at 10 years and $XXB ponzi scheme. Perhaps one of greatest schemes in history? Maybe it will unravel in the next 10? Time will tell.
In any case, this scenario has very well been accounted for. The Bitcoin network can fork its consensus rules when such drastic requirements require it. Such as to a different hashing algorithm, and snapshotting of its previous state.
> Ponzi scheme This goes back to square one, which is that in the absence of understanding the value of bitcoin, a scheme is the only logical explanation.
We are now sitting at 10 years and $XXB ponzi scheme. Perhaps one of greatest schemes in history? Maybe it will unravel in the next 10? Time will tell.
> Don't you think we have other problems too if Sha-2 is broken? I'm going to assume that you aren't worried about the numerous other applications where this scenario would be catastrophic?
It is exactly this reason I find bitcoin incredibly scary. The catastrophe that happens if bitcoin "succeeds" in breaking SHA-2 is directly part of why I think Proof of Work is at best a waste of processing power, and at worst a catastrophe we are watching in real time.
> In any case, this scenario has very well been accounted for. The Bitcoin network can fork its consensus rules when such drastic requirements require it. Such as to a different hashing algorithm, and snapshotting of its previous state.
Which again is my point earlier: forks are natural parts of how bitcoin operates and directly a part of the underlying data structures. It doesn't exist without forks. You couldn't build bitcoin without forks. It isn't considered likely it would continue to exist in the future past certain points (including catastrophic ones) without forks. So the distinction of which fork is the "one true fork" is a political economics game, not a technical distinction in any way.
It is exactly this reason I find bitcoin incredibly scary. The catastrophe that happens if bitcoin "succeeds" in breaking SHA-2 is directly part of why I think Proof of Work is at best a waste of processing power, and at worst a catastrophe we are watching in real time.
> In any case, this scenario has very well been accounted for. The Bitcoin network can fork its consensus rules when such drastic requirements require it. Such as to a different hashing algorithm, and snapshotting of its previous state.
Which again is my point earlier: forks are natural parts of how bitcoin operates and directly a part of the underlying data structures. It doesn't exist without forks. You couldn't build bitcoin without forks. It isn't considered likely it would continue to exist in the future past certain points (including catastrophic ones) without forks. So the distinction of which fork is the "one true fork" is a political economics game, not a technical distinction in any way.
keymone(1)
Those are value adds for a currency. But the article here is speaking about the core value of a currency. Essentially for an asset to be useful it's value must be backed by something and it must be possible to both defend and deploy that asset in a reasonable way. Bitcoin has not yet made the case that is practically useful for anything other than a volatile store of value.
I would say that it has made the case for it based on how many people have used it to exchange value internationally, trustlessly, at a very low cost.
Additionally, Bitcoin network is backed by its ability to detect and refuse counterfeit coins.
You can do most of the above with Visa or Venmo as well, however you run the risk of tax reporting, transaction reversal, fraud, negligence, changing fees...
When Visa works, it works well. But when it fails, it fails in quite bad ways that Bitcoin does not.
Additionally, Bitcoin network is backed by its ability to detect and refuse counterfeit coins.
You can do most of the above with Visa or Venmo as well, however you run the risk of tax reporting, transaction reversal, fraud, negligence, changing fees...
When Visa works, it works well. But when it fails, it fails in quite bad ways that Bitcoin does not.
Also, add the open source part meaning everyone can audit how it works and fork it if needed, and the network effects preventing said forks.
Being protected from double spend or 51% attacks by having everybody in the world cooperate, because it is in their own selfish interest to do so, is indeed unprecedented.
The current price seems extremely undervalued. I believe it is due to factoring-in the legal risks for when government realize a currency they can't control (block people they don't like, see eurodollars) or inflate at will (regardless of the reason, good or bad, it's about control) is a threat that must be legislated away.
Being protected from double spend or 51% attacks by having everybody in the world cooperate, because it is in their own selfish interest to do so, is indeed unprecedented.
The current price seems extremely undervalued. I believe it is due to factoring-in the legal risks for when government realize a currency they can't control (block people they don't like, see eurodollars) or inflate at will (regardless of the reason, good or bad, it's about control) is a threat that must be legislated away.
What's going to stop me from using bitcoin for everything, and then exchanging some into dollars at the last second to pay my taxes?
Nothing, but if I earn $1 on January 1 and anticipate 30% tax on that due April 15, saving $0.30 guarantees that I can pay that debt. If I earn 1 mBTC on January 1 and save 0.3 mBTC, then that might be worth much more or less than my tax liability come April 15.
The tax argument for the value of USD is because people have future debts denominated in USD (taxes), and they become aware of the amount of those debts in USD before those debts are due. If those people want an asset perfectly matched to that future liability, then they want USD. The demand is from that saving period, not the actual payment (which you correctly note is brief, just however long the transaction would take). Most discussions either express this distinction unclearly or miss it altogether, including the linked article.
The tax argument for the value of USD is because people have future debts denominated in USD (taxes), and they become aware of the amount of those debts in USD before those debts are due. If those people want an asset perfectly matched to that future liability, then they want USD. The demand is from that saving period, not the actual payment (which you correctly note is brief, just however long the transaction would take). Most discussions either express this distinction unclearly or miss it altogether, including the linked article.
There are already initiatives to pay taxes directly in Bitcoin. https://bitcoinmagazine.com/articles/why-ohios-state-treasur...
This isn't some fringe idea it is being developed by governments around the US. I remember reading about some city in America that will take Bitcoin directly for tax but I can't find the article.
This isn't some fringe idea it is being developed by governments around the US. I remember reading about some city in America that will take Bitcoin directly for tax but I can't find the article.
See my comment below--the tax-related demand for USD comes from the holding period between incurring the tax liability and paying it, not from the payment itself. Even if you get paid in BTC and pay your taxes in BTC, 1 mBTC earned on Jan 1 with a 30% tax rate doesn't imply you owe 0.3 mBTC on April 15--USA tax law expects you to convert from BTC to USD using the Jan 1 exchange rate to calculate your tax liability, and then convert back using the April 15 exchange rate when you make the payment.
Nothing, really. Except that it would be a taxation nightmare, since every time you spend some you need to report the difference in price between when you acquired it and when you spent it, and pay tax on the gain/loss. It would also be a lot of effort to find people willing to accept bitcoin for things like groceries.
full decentralization and seizure-resistance work as good guns against state tyranny
That is orthogonal to the point of the article.
The state can demand, using their guns, that you pay them in the coin of their realm.
At that point, you need to come up with those coins, or face their guns.
You can have your BTC be decentralized and seizure-resistant at that point, but that will not stop the Leviathan from jailing or killing you. The "guns" of the article are the actual guns of the IRS.
The state can demand, using their guns, that you pay them in the coin of their realm.
At that point, you need to come up with those coins, or face their guns.
You can have your BTC be decentralized and seizure-resistant at that point, but that will not stop the Leviathan from jailing or killing you. The "guns" of the article are the actual guns of the IRS.
Do the IRS really carry guns? The man-power needed and costs to enforce collection of coins means this doesn't scale well for the state
They have guns and a yearly budget of US$1.2 billion
https://en.wikipedia.org/wiki/IRS_Criminal_Investigation
https://en.wikipedia.org/wiki/IRS_Criminal_Investigation
They are notorious for "always" catching their criminals, too. Local law enforcement of many stripes in multiple states tried to catch Capone, but in the end it was the Revenuers that caught Capone on tax evasion.
For every Capone there are thousands of people you never heard of successfully evading taxes
The article makes a lot of good points. I think people put way too much stock into the government not being able to regulate digital currencies. Besides the obvious technical advantages of a state power, they can simply create policy that turns people into criminals if they intentionally answer questions wrong on their tax returns.
I think the guns of bitcoin are it's decentralized design backed by the lobbying of domestic forces (The EFF, ACLU, exchanges, etc)
Since when does Medium require an account to read articles? Guess I'm not gonna read this one.
It's an interesting article and worth a read. Here's an outline link from elsewhere in the thread.
https://outline.com/VBSEgq
https://outline.com/VBSEgq
yaaawn. this article is full of tired arguments. Bitcoin is a lot more like gold than a competitor to the US dollar or substitute for cash.
This is just plain wrong. Currencies have value themselves for their utility as a means of exchange, not because of taxes. This idea that raising taxes increases the value of a currency is bonkers.